"EXCESS PROFITS DUTY"

Dominion, Volume 10, Issue 3143, 28 July 1917, Page 8

"EXCESS PROFITS DUTY"

(To tho Editor.)

Sir,—A number of your correspondents seem to think that aij, classes of farmers are making hugo war'profits, but so far as "bush farmers" are concerned I think I can make it very clear that quito tho opposite is tho case, and that tho excess profits' tax operates in their caso most unjustly.

1 do not wish to suggest that wo as a class should not pay our proportion of war taxation, quito tlio contrary; wo should all pay in accordance witii our income. The excess profits' tax is admirable in theory, but in practice has operated most unfairly.

I will put J>efore your readers a typical caso of how the Finance Act of 191G affccfs tho bush fanner. In 1900 Mr. Brown took up a block of bush land of 1500 acres from a Maori Land Board (term of lease 21 years at 2s. per acre, with right to ronew for a second period of 21 years, rent determined at 5 per cent, on then unimproved, value. pensation allowed for improvements). There are hundreds of thousands of acres of bush land being farmed by Europeans on terns similar to those in tho North Island, so it cannot bo contended that the cause quoted has not general application.

During the years 190!) to 1915 Mr. Brown has succeeded in felling pjid grassing 1000 acres and his income is increasing yearly, but for tho first few years his income was practically nil, TrtfC once he has passed the development period his capital invested shows a fair return. His position is on all fours with that of an orchardist who has practically little income for tho first five years. Mr. Brown now becomes acquainted with the Finance Act of 1910, and he is called upon to make a return of standard income, and he elects to take tho year ended March 31, 1914, as his best year, and his income is shown at ,£350. Ho finds also that his income (paper profit only, as I will show later) for the year ended Maroh 31, 1916, is J2BOO. An allowance of .£SO, being interest on capital introduced from standard incomo year to commencement of 1916 period, helps to increase his standard income to £100, thus ho is called upon to pay in addition to the ordinary tax under the Finance Act, 45 per cent, on .£4OO, .£IBO being excess pronts duty on his excess income above standard income. Now, Mr. Brown's income of .£BOO for 1916 is not real income, it is simply a paper one, and,is due to the fact that the form of incomo required to be filled takes full credit for all stock and produce sold at war prices, but doos not allow ono penny piece to bo charged up to working account in connection with the increased cost of felling the bush, grassing tho land and erecting new fences, the cost of which have gone up over 100 per oent., and must in accordance with the Commissioner's decision bo charged to capital account. It is clear that at the end of Mr. Brown's lease he will not be allowed other than normal values for his improvements. Therefore, to arrive at his trno incomo tho "excess cost" of felling, grassing, nnd fencing should ho debited to working account. Mr. Brown cannot allow his bush to remain standing and pay rent on it; and is forced to felland grass it ft tho present high prices, furthermore he is unable to get sufficient labour to do tho necessary repair and maintenance work which is inseparable from bush farming, and working account is not debited with much on this score. This all helps to increase tho "paper income." Of course, if a man owned the freehold his position would bo somewhat bettor, but a hardship is inflicted in both cases.

Take tho man who has a steady income of, say, £10,000 from interest on capital invested; he pays no excess profits duty whatever, and goes about telling everyone Ciat the Finance Act of 1916 is a just and fair method of taxation (p). Especially does lie agree with Part II thereof, "excess profits duty." I think it has been made abundantly clear to our legislators that the incidence of taxation should be so changed as to provide'for tho only fair method, viz., graduated income tax, and then each of us will pay according to our incomes.—l am, etc., BUSHFARMEE, July 20, 1917.